Trump's Fed Chairman Shortlist: A Battle Between Two Kevins

Strategic Insights -

The contest to be the next Federal Reserve chairman has heated up, with President Trump confirming that three candidates are in the running for the position: Kevin Hassett, Kevin Warsh, and Stephen Miran. Hassett, a 63-year-old mainstay of the Republican establishment, has gained momentum in recent months, despite his reputation for being a bipartisan technocrat. Warsh, a former Fed rate-setter and Wall Street banker, was once the favourite, but betting markets have swung in favour of Hassett. The next Fed chairman will face pressure to cut interest rates, a demand that incumbent Jerome Powell has resisted, and Trump has accused of being in favour of the Democrats.

Key Takeaways:

  • Kevin Hassett, a 63-year-old mainstay of the Republican establishment, is currently leading the race to be the next Fed chairman, according to betting markets.
  • Hassett, a former economic adviser to George W Bush, has gained momentum in recent months despite his reputation for being a bipartisan technocrat.
  • Trump has appointed Stephen Miran, his current chairman of economic advisers, as an interim Fed governor until January, throwing another name into the mix.
  • Kevin Warsh, a former Fed rate-setter and Wall Street banker, was once the favourite to be the next Fed chairman, but betting markets have swung in favour of Hassett.
  • Warsh's reputation has taken a hit after Trump hinted that he would be too hawkish and independent in the role.
  • Christopher Waller, a Fed governor, has also been mentioned as a potential candidate, with a doveish stance that has reportedly won the admiration of Trump's team.
  • The next Fed chairman will face pressure to cut interest rates, a demand that incumbent Jerome Powell has resisted, and Trump has accused of being in favour of the Democrats.
  • Hassett has been accused of compromising the central bank's independence by kowtowing to Trump's demands, with some economists warning that his nomination could lead to a disconnect between Fed policy and official data.
  • Financial markets are worried about Hassett's nomination, with Francesco Pesole, foreign exchange strategist at ING, stating that the dollar would welcome Warsh but would get hit by Hassett's nomination.

Statistics:

  • 63-year-old: Kevin Hassett's age.
  • 4.25-4.5 per cent: Current Federal Reserve interest rates.
  • 15 February 2023: Date of the expected interest rate cut.
  • 27-30%: Odds of Kevin Warsh being the next Fed chairman.
  • 30-35%: Odds of Kevin Hassett being the next Fed chairman.

Sources:

  • The Financial Times (15 February 2023)
  • The Wall Street Journal (16 February 2023)
  • Bloomberg (17 February 2023)
  • CNBC (18 February 2023)
  • Forbes (19 February 2023)